Pagaya Technologies (NASDAQ: PGY) stock fell 22.5% at 10:45 a.m. ET on Thursday after the financial AI startup announced a $95 million stock offering.
Pagaya informed investors of the sale yesterday, but it released the price today.
That AI stock will cost $12.70 per share, 18% less than yesterday. Pagaya could sell 8.6 million ordinary shares at this price through the offering and the overallotment option its underwriters would exercise.
More than the 7.5 million shares it indicated it would sell yesterday (including overallotment). The company's March 8 1-for-12 reverse stock split reduced its share count by 12x, resulting in these supersized shares.
On 63 million shares, this will dilute existing owners by 13% and make each share worth 18% less. No wonder investors are upset.
What will investors get? If all shares are sold, Pagaya should earn $109 million in gross proceeds from the stock offering, before discounts, fees, and offering costs. Management plans to spend this money "for general corporate purposes and to support future growth."
Strangely, Pagaya lost $10 million in cash last year, which may explain why it has to raise capital today. However, S&P Global Market Intelligence analysts expect Pagaya to generate over $110 million in free cash flow this year without the stock sale. Pagaya may not need to issue stock this year because analysts expect it to earn a profit under GAAP.
Contrary to popular belief, today's market sell-off may be a good opportunity to buy Pagaya Technologies shares.
follow for more updates